BEEF UP YOUR COMPETITOR: A MODEL OF ADVERTISING COOPERATION BETWEEN INTERNET SEARCH ENGINES
Session Advertising I
Session ChairJose Luis Moraga, University of Groningen

Presenter(s) Sapi Geza, DIW Berlin
Co-Author(s) Irina Suleymanova, Deutsches Institut für Wirtschaftsforschung (DIW Berlin)
Keywords Advertising, Search Engine, Strategic Complements, Technology and Two-Sided Market
JEL Codes L13, L24, L86, M37

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We propose a duopoly model of competition between internet search engines endowed with different technologies and study the effects of an agreement where the more advanced firm shares its technology with the inferior one. The superior firm enters the agreement only if it results in a large enough increase in demand for advertisements at the competing firm and a relatively small improvement of the competitor's search quality. Although the superior firm gains market share the agreement is beneficial for the inferior firm. The cooperation is likely to be in line with the advertisers' interests and to be detrimental for users.

 
When & Where
Thu 3 Sep 2009
14:00 - 15:30
Room
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